Red tape is costing people time and dampening economic growth. Among the most hurt by this are our approx. 3.6 million SMEs. Cutting red tape means giving companies more time to do business, to innovate, create jobs and to train young people.

Ensuring that our public administration is working efficiently and that we have modern and lean regulation in place is absolutely key for our businesses to be competitive and able to generate growth and employment in Germany. This is why, in 2006, the Federal Government launched its programme for cutting red tape and creating better regulation that remains in place to day.

The programme is proving effective

Since the introduction of the programme, the various measures taken by the Federal Government in this context have brought down the administrative costs borne by companies by a fourth – which is equivalent to more than 12 billion euros every year. This development can be clearly seen in the Cost of Bureaucracy Index (BKI), which was introduced in 2012 to create transparency at a glance. In 2006, theNational Regulatory Control Councilwas established to help with permanent implementation of the reform agenda.

The latest Progress Report on Cutting Bureaucracy, which covers the reporting period of 2015, shows that the measures are proving effective. The cost of compliance with regulatory requirements borne by the private sector fell by approx. 1.4 billion euros that year. The 'bureaucracy brake', a rule stipulating that for each piece of regulation introduced another must be phased out, has cut the cost of compliance for businesses by 958 million euros. For the first time since its introduction, the Cost of Bureaucracy Index fell below the 100-point mark in 2015, dropping to 99.1 points.

TheSecond Cutting Bureaucracy Act (PDF: 307 KB, in German), which was approved by the Bundesrat on 12 May 2017, further reduces the administrative burden on companies by an additional 360 million euros per year. The legislation is currently being debated in parliament and is to take effect as soon as possible. The combined effect of the First and Second Cutting Bureaucracy Acts and of the 2015 Act Modernising Procurement Law will be a reduction of the burden on the economy by 2 billion euros.

At the same time, we are aware that we must not let up in our permanent efforts to further limit the cost of bureaucracy. The next report by the Federal Government on its progress on cutting red tape is due in spring 2017.

Four figures on cutting red tape

12

billion euros per year.The amount by which companies saw their administrative costs reduced between 2006 and 2012.

3,6

million companiesare subject to administrative requirements.

1

billion euros less spent on red tape every year.That's the outcome of the 'one in, one out' rule that has been in place since 2015.

99,1

Cost of Bureaucracy IndexIn 2015, this index fell below the initial value of 100 for the very first time.

Measures

A new drive to cut red tape

To relieve the unnecessary burden on business, particularly on SMEs. That's the goal behind the First and Second Cutting Bureaucracy Acts, the 'one in, one out' rule ('brake on bureaucracy'), and the SME test.

In late 2014, the Federal Cabinet approved a key points paper on cutting red tape. This paper was added to the existing work programme, making it more powerful. Many of the points that are part of this programme have since been implemented or are currently being put into practice. The main relief under the first Cutting Bureaucracy Act was rolled out in 2016, and the Second Cutting Bureaucracy Act further reduces the administrative burden on companies by an additional 360 million euros per year.

The Cutting Bureaucracy Act

Under the new legislation, a greater number of small companies are exempt from the accounting and record-keeping obligations set out in the Commercial Code and the Tax Code. New companies now have more time until they must submit data to be used as part of the official statistics. This has been achieved by way of raising the relevant reporting thresholds from 500,000 to 800,000 euros. For the first time, this is also being piloted for parts of the environmental statistics. The thresholds that apply for the intra-Community statistics have also been raised. The energy sector has seen the red tape affecting it cut in numerous ways. For instance, the reporting duties for biogas monitoring have been streamlined.

The Cutting Bureaucracy Act has also amended our tax law in three places: reporting obligations for persons subject to church tax have been reduced, and the threshold up to which a flat-rate income-tax rate applies for persons employed on a short-term contract raised to 68 euros. The calculation method used to determine the amount of income tax to be deducted from the income of spouses/civil partners has been simplified. This too has helped reduce the burden borne by our citizens.

Overall, the private sector has seen its administrative burden reduced by 705 million euros per year.

The Second Cutting Bureaucracy Act

The Second Cutting Bureaucracy Act (PDF: 307 KB, in German)seeks to quickly ease the administrative burden felt by small firms, particularly those with only two or three employees, as are typically found in the skilled-crafts sector. The main focus of the draft legislation is to eliminate red tape in tax law and to promote the use of digital technology. The latter applies to the use of digital technology in administrative procedures and also in the skilled-crafts sector (modernising the Crafts Code). The Second Cutting Bureaucracy Act will enhance the notion of points of single contact and promote eGovernment (see additional measures), for instance by ensuring that uniform information on legislation and regulation is made available on internet platforms. The rules on social-security contributions will also be simplified by means of the introduction of new deadlines for payment. All this will reduce the burden on business by 362 million euros per year.

Making it easier to carry forward losses

On the initiative of the Federal Ministry for Economic Affairs and Energy, the Federal Government is making improvements to the tax system. On 14 September 2016, the Federal Cabinet approved draft legislation making it easier for corporations to carry forward their loses. The new rules eliminate the tax barriers that have made it difficult for companies to access the capital they need, notably improving the situation for young companies in need of capital.

Higher thresholds for the depreciation of low-value assets

Since 1 January 2018, companies have been able to immediately write off purchases like office materials, tablets and word processing equipment up to a value of 800 euros. Previously, it was only possible to immediately write off purchases up to a limit of 410 euros (net); higher-value assets had to be depreciated over several years. The raising of this threshold means that many assets will no longer have to be listed in tax returns over several years, and this will reduce the amount of bureaucracy for small and medium-sized enterprises in particular. Find out more here.

'Brake on bureaucracy'

The"Brake on bureaucracy" (PDF: 145 KB, in German), is a rule that the Federal Government has imposed on itself in a political commitment to limit the regulatory burden on businesses in an effective way, and which has been in force since 1 January 2015. Under this rule, any additional regulatory burden imposed on companies must be fully offset within a year, meaning that the burden on business must be eased elsewhere. The advantage of this rule is that it does not restrict the government in introducing new policies.

The SME test

The SME test (PDF: 74 KB)has become mandatory as of 1 January 2016. It is an internal working aid designed to support the federal ministries in taking the needs of SMEs into account as legislation is being drafted, and to help them look at alternative ways of achieving the same regulatory objective. In this way, the SME test helps to draw attention to the cost of specific pieces of regulation for small and medium-sized companies. The objective here is to prevent bureaucratic burdens being placed on SMEs as much as possible. The guidelines that form the SME test are based on findings including those from a study on"Taking account of the needs of SMEs in regulatory impact assesment" (PDF: 1,7 MB, in German).

There are many places where there is still red tape to be cut. Much can be achieved by introducing electronic procedures and making better use of data that is already available. This will eliminate the need for multiple notification of the same information. It will also allow companies to meet their notification requirements in less time.

Reform of procurement law: making life easier for companies

The procurement law reform entered into force on 18 April 2016. The introduction of greater flexibility, e.g. in negotiations between contracting authorities and bidders, and the fact that the process largely takes place online, has facilitated the procurement process and thus made life easier for the participating companies. The public procurement system is being taken into the digital age.

Register for the electricity and gas industry brings reporting and information obligations together

As far as the energy sector is concerned, a central register for the electricity and gas industry is to be established in 2017, to be kept by the Bundesnetzagentur. This register will streamline notification and information requirements for companies. The Federal Statistics Act has been revised to allow for better use of data that is already available within the administration.

In summer 2016, the Federal Government updated its work programme for cutting red tape and implementing better regulation.

Electronic trust services and secure digital identities

The Federal Government adopted the Act to implement the EU’s eIDAS Regulation (in german) on 29 March 2017. The key piece of this omnibus act is the “Trust Services Act” which facilitates the use of electronic trust services in Germany. The best-known trust service is the electronic, or digital signature. eIDAS introduces more such services: the electronic seal, the electronic time stamp, electronic delivery services and web page certificates.

Electronic trust services enable companies and citizens throughout the EU to conduct secure electronic transactions. These services provide a high technical level of security, high legal value and make it possible to conduct user-friendly paper-free business transactions and e-government services across the EU at low cost. Practical examples can be found (in German) in the information paper on the Act to implement the EU’s eIDAS Regulation (in german).

A one-stop shop

One of the main projects listed in the key points paper on reducing bureaucracy is the establishment of a 'point of single contact 2.0' for companies, essentially a one-stop shop.

In order to be able to compete successfully and generate growth and employment, German businesses rely on a public administration that is pro-business and works efficiently, and on modern, lean regulation. This is what the Point of Single Contact is about.

The Point of Single Contact offers clear advantages to businesses: soon, they will be able to use a national online portal that will guide them straight to the Länder websites that are relevant to them. Many Länder and municipalities are already operating administrative and service portals which provide citizens and companies with easy-to-access information and allow them to use certain online services. All of the system’s functions are also to be available online. The underlying principles (PDF: 245 KB, in German) for the new 'Single Point of Contact 2.0' were presented to the public and discussed at a conference on 15 October 2015. The future strategy was adopted at the Conference of Economic Affairs Ministers in December 2015. Find out more about the conference here.

Additional measures

The Act to Reduce Bureaucracy, the “bureaucracy brake”, and the SME test have implemented some initial key aspects of bureaucracy reduction, as decided by the federal cabinet back on 11 December 2014. The implementation of further measures included in the key points has already begun:

As far as the energy sector is concerned, a central register for the electricity and gas industry is to be established in 2017, to be kept by the Bundesnetzagentur. This register will streamline notification and information requirements for companies. In order to relieve companies of the burden of further reporting requirements, greater use is to be made of data already held by the administration.

Also, existing or impending red tape is to be reduced or avoided as far as possible. Here are a few examples: the Federal Government, the Länder and the business community have worked together to find ways to simplify the start-up process, as a further measure to reduce red tape. Their report is called “Compliance costs in the field of start-ups” (in German, PDF: 3 MB). In the last five years, the burden of statistical reporting on small and medium-sized enterprises has been reduced by more than €20 million a year. In order to make the electronic invoice manageable for SMEs, the “Forum electronic invoicing in Germany” (FeRD) has developed a uniform data format for electronic invoices. Practical guidelines which show SMEs in particular how they can integrated the electronic invoice into their in-house processes without much effort or cost can be found (in German) here (PDF: 378 KB).

Our principle for the future is to build a business-friendly administration. To do this, we wish to make even greater use of the possibilities of electronic communications, review existing procedures to identify potential improvements, and build the concept of eGovernment into plans for new legislation. Our work aims to keep developing fresh potential for simplification. The focus is particularly on tax law and taxation procedures, particularly for SMEs.

European level

Better regulation for Europe

Cutting red tape and pursuing better regulation are vital in our efforts to generate growth and employment in Europe. The Federal Government is working with the other Member States and the European institutions to ensure that any unnecessary burden created under EU legislation is reduced, and that law-making processes in Europe are optimised.

REFIT

Better regulation and cutting red tape are a top priority for European-level institutions. In launching its REFIT programme, the European Commission has followed a holistic approach designed to reduce the administrative burden resulting from EU legislation and to do this across all Member States. The objective of the programme is to systematically and regularly review EU legislation and to look for ways of streamlining it, in order to ease the burden on business, especially SMEs. Ultimately, the process is to ensure that European legislation is efficient and powerful, that it helps reduce costs and generates growth and employment.

REFIT platform

The European Commission has established a REFIT platform that serves as a forum for dialogue with the Member States and other stakeholders. It is chaired by the First Vice-President of the European Commission, Frans Timmermans, and made up of two groups. These are the Government Group that brings together representatives of the 28 Member States (represented for Germany by the Federal Ministry for Economic Affairs and Energy), and the Stakeholder Group, which consists of 18 high-ranking representatives of business, civil society and the social partners, one representative of the Committee of the Regions, and one of the European Economic and Social Committee.

The most important task of the REFIT platform is to assess specific proposals for streamlining regulation which have been submitted by citizens or stakeholders either by post or via the 'Lighten the load - Have your say!' online portal. In its assessment, the platform looks at whether these proposals would be effective in cutting red tape and whether this can be achieved without compromising on the intended effects of the relevant EU rules. The REFIT platform then submits its proposals to the Secretariat-General of the European Commission, which has committed to responding to these proposals by either implementing them or by issuing a public statement on why it rejects the proposal.

EU SME monitor organised by the Federal Ministry for Economic Affairs and Energy

European regulation is having an ever greater impact on German SMEs and their business. This is why it is in these firms' best interest to become actively involved in the shaping of EU initiatives. However, many small companies do not have the capacity to seek out detailed information about such initiatives at an early stage.

The Federal Ministry for Economic Affairs and Energy and its EU SME monitor can help. The EU SME monitor provides SMEs with up-to-date information on EU initiatives that are relevant for them, and gives them access to public consultations held by the European Commission. Thanks to the monitor, SMEs have a chance to learn about relevant EU proposals at a very stage and can make their interests heard.

The EU SME monitor is organised by the Federal Ministry for Economic Affairs and Energy to ensure that German companies can have a say on important European regulatory initiatives.